ALM07000 - Pay bill: what counts as pay bill

HMRC updated this guidance on 25 July 2023. After undertaking a review of a previous update, changes have been made to correct and clarify the legislative position on what should be included in the pay-bill. Particularly when the earnings of an employee in a pay period fall below the Secondary Threshold (ST).

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Section 100 of the Finance Act 2016

Pay bill is based on the total amount of earnings on which an employer is liable to pay Class 1 secondary NICs. This includes:

  • any remuneration or profit coming from employment such as wages, bonuses and commissions - payments from a registered pension scheme are not considered earnings for NICs purposes - a limited group of pension payments may be subject to Class 1 NICs, if paid out of an employer-financed retirement benefits scheme
  • earnings below the Lower Earnings Limit (LEL) and the Secondary Threshold (ST)
  • earnings of employees under the age of 21 and apprentices under the age of 25

Earnings below the LEL and the ST are included in the pay bill even when the total earnings for the employee in that pay period do not exceed the ST.

Although employers do not pay Class 1 secondary NICs on the earnings up to the relevant Upper Secondary Threshold for employers of

  • employees under the age of 21 (UST),
  • apprentices under the age of 25 (AUST),
  • employees in a Freeport (FUST),
  • employees who were Armed Forces Veterans (VUST)

For information on upper secondary thresholds see NIM01200

Employers remain liable for the payment of Class 1 secondary NICs on those earnings even though the rate at which they would pay is 0%. As a result, these earnings should be included in the pay bill for Apprenticeship Levy purposes.

Pay bill does not include any earnings on which the employer is not liable to pay Class 1 secondary NICs, so it does not include:

  • earnings of employees under the age of 16
  • earnings of employees not subject to UK NICs legislation
  • any payment which is not considered earnings for Class 1 NICs purposes, for example, benefits in kind which are liable to Class 1A NICs (e.g. company cars or private medical insurance)
  • any non-cash benefit within a salary sacrifice arrangement, which is not subject to Class 1 NICs
  • payments to employees working abroad where there is no Class 1 secondary NICs liability